UScellular seizes the moment
by Martha DeGrasse 8/9/23

With its mobile and tower businesses both under pressure, UScellular is in the process of exploring options for its shareholders. Its biggest shareholder, Telephone and Data Systems (TDS), owns 83% of the regional telco so the TDS board members will of course be key decision makers if UScellular decides to sell or partner with another company. 

The decision to evaluate strategic alternatives got a warm reception on Wall Street. TDS stock has risen more than 70% since the announcement and UScellular’s stock is up more than 80%. 

UScellular has a number of assets that potential buyers might want at this time. Those include towers, spectrum, valuable enterprise customers and the technology associated with its wireless network.

Towers

At the end of Q2, UScellular owned 4.341 towers and its tenancy rate stood at 1.55, meaning UScellular is likely the only tenant on roughly half those towers. 

The company held its Q2 earnings call just after announcing its plan to explore strategic alternatives. Analyst Ric Prentiss of Raymond James kicked off the Q&A by asking CEO Laurent Therivel if UScellular’s tower business could be sold separately. Therivel answered by saying that the idea of splitting off the tower business is “something we’re evaluating” and promised more information about the tower business in the weeks ahead.

Public tower companies are reporting slowdowns in leasing activity, and some might face pushback from shareholders if they moved to expand their domestic portfolios at this time. Vertical Bridge, the nation’s largest private tower owner, would not face this constraint. In 2014, Vertical Bridge paid $159 million for almost 600 USceullar towers located outside the network operator’s core markets.

Spectrum

With no spectrum auctions on the horizon, the U.S. public carriers may be tempted by UScellular’s portfolio, which includes low-band, mid-band and millimeter wave holdings. But like the towercos, carriers are facing the same economic pressures UScellular faces, and two of the three biggest carriers  are heavily leveraged already.

UScellular holds some spectrum it has not fully deployed, notably in the C-Band, the 3.45 GHz band, and 3.55 - 3.7 GHz (CBRS) band.  This could attract  some non-traditional buyers, including even the cablecos.

Cable operators Comcast and Charter have amassed roughly 6 million mobile subscribers each, using spectrum leased from Verizon. Both operators own CBRS licenses, and Charter is already deploying infrastructure in one market. Moving subscribers onto their own spectrum will  give these nascent mobile operators better returns, and acquiring a mobile network operator with spectrum, infrastructure and most importantly network operating experience could jump start these efforts.

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With subscribers sliding, UScellular is getting down to business

UScellular’s towers and spectrum are the assets that may generate the most interest as potential partners or buyers study the company. But the company’s wireless business is also valuable, and could be a strategic acquisition for some partners. 

Like all U.S. mobile network operators, UScellular has looked to enterprise customers to drive growth as consumer handset upgrade cycles have lengthened. The regional operator has focused on private networks and the internet of things, and has developed a flexible set of solutions for enterprise customers.

According to UScellular CTO Mike Irizarry, the operator’s cloud native 5G SA core can be deployed for private networks using open interfaces. Irizarry recently told LIght Reading Nokia is the operator’s 5G SA core vendor. However, enterprise customers who deploy UScellular’s private network solutions will have choice when it comes to the RAN. 

During WIA’s Connect (X) event earlier this year, Irizarry explained that UScellular’s 5G SA core “interfaces with different vendors” and he said private network customers can use their chosen RAN equipment with UScellular’s core. He said the operator has also developed a solution that will allow enterprise customers to use their RAN with UScellular’s spectrum and core, but as of May that had not yet been deployed.

Utility customers, FWA

During UScellular’s recent Q2 earnings call, CEO Laurent Therivel said the carrier’s private networks business is growing and highlighted “a variety of different private networking deals with utilities.”

Relationships with utilities will be valuable to network operators as the national effort to close the digital divide gains momentum. Many utilities are becoming broadband providers, and although most use fiber, some are adding fixed wireless as well. 

Fixed wireless is one of UScellular’s priorities. With a largely rural customer base, the operator estimates it has 2.7 million potential FWA customers. So far, it has signed up 100,000 subscribers, primarily using low-band and millimeter wave spectrum, and now the operator is starting to add mid-band spectrum for FWA. 

During the company’s Q2 earnings call, CEO Laurent Therivel said the company is talking actively to state broadband officials about how UScellular can help deploy grants made through the Broadband Equity Access and Deployment (BEAD) program. 

Therivel has been a longtime proponent of network sharing, and he reiterated his position on the call. “I simply don't think that it makes economic sense to build 4, 5 duplicative 5G or 6G networks in rural America,” the CEO said. He added that UScellular and another unnamed carrier are working on shared backhaul.

UScellular’s expertise with network sharing, open interfaces, and FWA are assets that potential buyers or partners will need to weigh against the wireless network’s marketplace performance. The carrier has lost postpaid subscribers during each of the last ten quarters, according to its published reports. At the end of Q2, the carrier had 4,194,000 postpaid subscribers, down 4.9% since its subscriber slide began at the start of 2021. Prepaid subs have declined 7.4% during the same period, and now stand at 462,000. And operating income was down 13% year-on-year for the 3 months ended June 30 and down 45% year-on-year for the first half of 2023.

The set of possible buyers capable of reversing the UScellular network’s trajectory is likely small. But a larger set of partners may show interest in the carrier’s network technology, particularly the cloud native 5G SA core, which has applications that stretch beyond serving consumers on a public mobile network.